1. LEV LEVIEV VS. DE
BEERS
Nikhil Agarwal | Navneet Kumar | Saurabh Kumar |
Sachin Pal
2. Introduction – De Beers
Who is de beers?
Not retailer
Not manufacturer
They are miner and buyer of 70% of the world’s
rough diamonds.
De beers is a South African company and was
founded by Cecil Rhodes in 1888 by forming a
cartel with the ten largest merchants in South
Africa.
By 1890, de beer controlled 95% of the world
diamond production.
The company spends $180million a year world
wide to advertise cut diamonds.
3. De Beers as a Monopoly
De beer was almost the sole seller of
diamond.
Sells a commodity with no close substitute.
De Beers took control of all aspects of the
world diamond trade in 1989.
The main principle of de beer’s business
model was to match the supply of diamonds
with demand.
They could determine who could buy uncut
stones, in what quantities and quality and
decide which cutting centers to be used.
4. Decline of Monopoly
In 1991, the Soviet Union (the world's second-
largest diamond producer by value) collapsed.
Involvement in a 1994 price fixing case.
In 1996, Australia's Argyle mine became the
first major producer to terminate its contract
with De Beers.
Several rich diamond deposits were
discovered in the Northwest Territories of
Canada.
Diamonds became tainted by the term “blood
diamonds”.
5. Continued…
High-handed treatment towards buyers.
Alternative distributors came into prominence.
Weakness in the economies of consuming
regions.
The results: De Beers controlled a shrinking
share of output in a shrinking market.
The resulting problems for De Beers helped to
demonstrate the inherent instability of a cartel.
6. Role of Lev Leviev
Converted De Beers Monopoly into
duopoly.
Opened his own cutting factory in
1977.
Former sight-holder of De Beers.
1st dealer to operate across the
value chain – from mining to
polishing & retailing.
7. Continued…
Russia Angola Namibia
• Close to Vladimir • World’s 3rd • Paid $30 million to
Putin. largest acquire 37% of
producer of rough Namibian Minerals
• Brokered meetings diamonds. Corp.(diamond
between Russian mining
President & Israeli • Invested $60 million outfit).
Politicians. in
exchange for 16% • Opened a polishing
• Formed a joint of factory on Namibian
venture Angola’s largest coast.
with Russia’s state- diamond mines.
run
diamond mining & • Gave 51% share of
selling group : RUIS. Ascorp. To Angolan
govt.
• By 2003, Leviev
8. Reorientation Strategies
Trying to sell its existing products through
marketing and branding.
De Beers unveiled two branding initiatives –
Forevermark and De Beers name itself.
It employed the "Supplier of Choice" strategy
putting them in direct competition with its sigh-
holders.
Started joint initiatives with its sight-holders.
Buying other mining firms.
9. Conclusion
Area of improvements:
To maintain artificial high prices and
encourage sustainability of the diamond
business.
Convincing end customers they want a De
Beers diamond (“blood-free”, premium image ,
quality assurance, proprietary designs).
Advertise more in premium fashion magazines
like People and Vanity Fair.
